US-UK relations suffer blow as £31bn tech ‘prosperity deal’ shelved
Washington has cited a lack of progress on trade barriers, causing billions in investment to be paused
The US government has halted a multi-billion-pound investment into British tech over trade disagreements between the two countries.
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The £31bn “tech prosperity deal” was originally welcomed by PM Keir Starmer as “a generational stepchange in our relationship with the US” when it was announced during Donald Trump’s state visit in September this year.
As part of the deal, US tech companies pledged to spend billions in the UK, including a £22bn investment from Microsoft and £5bn from Google.
Yet for now, the implementation of the agreement has been suspended, with the US citing a lack of progress from the UK in lowering trade barriers in other areas.
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The U.S. is Britain's largest trading partner, and its big tech companies have already invested billions of dollars in their UK operations.
However, the Trump administration was reportedly unhappy about the UK continuing to levy a digital services tax on American tech companies and its food safety rules, which bar the export of certain agricultural products.
The prosperity deal included the creation of an artificial intelligence “growth zone” in the north-east of England, which UK officials said could bring in up to £30bn and create 5,000 jobs.
The agreement had also included commitments to working together on space, nuclear energy and satellite navigation.
But the text of the agreement stated that it only “becomes operative alongside substantive progress being made to formalise and implement” it.
The decision to put it on hold is a blow to the UK government, which hailed the agreement as significant success after intensive year-long diplomatic negotiations with the US.
The UK has been desperately trying to avoid punitive US tariffs on British exports.
As part of his diplomatic charm offensive, Starmer hosted Trump for a second state visit at Windsor Castle in September, an unprecedented honour for a US president.
Peter Kyle, the Business Secretary, and Liz Kendall, the Technology and Science Secretary, travelled to the US last week and met with government counterparts and tech companies in what may have been an attempt to salvage the deal.
It remains unclear if the scrapping of the agreement will affect other US corporate investment in Britain.
